Portuguese debt agency IGCP exchanged bonds maturing next year for securities due in 2015, reducing its 2013 repayment burden as it tries to regain access to long- term debt markets.
The agency bought 3.76 billion euros of bonds due in September 2013 with a yield to maturity of 3.1 percent in exchange for the same value of securities maturing in October 2015 with a yield to maturity of 5.12 percent, the Lisbon-based IGCP said on Wednesday. Before Wednesday?s bond exchange, the notes due in 2013 had 9.6 billion euros outstanding.
?The result was quite satisfactory because it indicates there is interest from investors to extend their exposure to Portuguese debt,? said Filipe Silva, who manages 60 million euros of securities at Banco Carregosa SA in Oporto, northern Portugal. ?If we see this exchange as a market test, I?d say that Portugal passed.?
Portugal has to meet the September 2013 bond redemption without relying on a European Union-led rescue program, which extends until the middle of 2014. While Portugal has continued selling bills, it hasn?t sold bonds since requesting the bailout in April 2011.
The yield on the September 2013 note fell 41 basis points, or 0.41 percentage point, to 3.20 percent at 11:34 a.m. London time, while the rate on the October 2015 bond fell 14 basis points to 5.23 percent, according to data compiled by Bloomberg.
?This marks a first step for Portugal to regain access to medium and long-term debt markets,? Joao Moreira Rato, chairman of the debt agency, said in an e-mail after Wednesday?s bond exchange. ?This transaction allows the extension of debt stock maturity, taking advantage of the continuous improvement in secondary market conditions.?
Yields have dropped at auctions and in the secondary market as the government cuts spending and raises taxes to comply with the terms of the 78 billion-euro aid plan from the EU and the International Monetary Fund. Prime Minister Pedro Passos Coelho has said that if the country can?t tap bond markets by September 2013 because of ?external reasons,? it would be able to count on continued support from the IMF and the EU.
Borrowing costs dropped to the lowest since 2010 at a Sept. 19 sale of 1.29 billion euros of 18-month bills, while the difference in yield that investors demand to hold Portugal?s 10- year bonds instead of German bunds has narrowed to 7.4 percentage points from 16 points on Jan. 31.
In January, Standard